Arrangement offering ‘more sustainable outcomes’ expected to clear way for merger of European business with ThyssenKrupp
The final move to secure the pensions of tens of thousands of steelworkers has been announced, ending any doubts about future payments.
Finalising the pension arrangements is expected to clear the way for Tata to merge its European steel business with the German firm ThyssenKrupp.
Tata said it had signed the documentation for a so-called regulated apportionment arrangement (RAA) with the trustee of the BSPS, offering “more sustainable outcomes” for pensioners, employees and the business.
When the RAA takes effect the BSPS will be separated from Tata Steel UK and a number of affiliated companies.
Steel UK gave details on Friday of a new scheme to replace the British steel pension scheme (BSPS).
Workers voted this year to accept lower benefits in return for investment which will secure jobs.
The trade unions Community, Unite and GMB said in a statement: “We welcome the RAA announcement which includes a commitment that Tata will stand behind a new scheme with reduced annual increases.
“For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.”
When the RAA takes effect, workers will be able to join a new BSPS, which will have lower future annual increases for pensioners and deferred members, and will give it an improved funding position which would pose “significantly less risk” for Tata, said the company.
Workers will now have a choice of joining the new scheme or come under the Pension Protection Fund( PPF), a lifeboat for when pension funds become insolvent.
A PPF spokesman said: “The trustees will be providing them with lots of valuable information about their future options. We’d encourage members to consider the details and their position carefully and decide whether the new scheme or the PPF is the better option for them.”
Stephen Kinnock, Labour MP for Aberavon, home of the Port Talbot steelworks, said: “Today’s news brings a welcome end to the uncertainty faced by 130,000 current and former steelworkers, their families and steel communities across Britain, including the thousands involved in the steel and connected industries in my constituency.
“The Port Talbot steelworks is the beating heart of our local economy and community, so the past 18 months have been particularly tough for our town.”
Koushik Chatterjee, Tata Steel’s group executive director, said: “Considering the continued challenges in the global steel industry as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business.
“The RAA is one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business.”